Manohar Kumar purchases an auto for ₹2,00,000 from Fairdeal Automobiles. After consulting with the experts in the auto field, Manohar decides that the estimated life of the auto is 8 years. After the life period, the auto is estimated to fetch ₹20,000.

Questions

(a) Calculate the depreciation using Straight Line Method (SLM) and Written Down Value (WDV) method of depreciation taking the rate to be 10%. Pass the journal entries on the basis of both Writing off and provisioning method.

(b) If Manohar decides to sell his auto for ₹1,50,000 after 3 years and purchases a Toyota Innova for ₹8,50,000, what will be the profit or loss from the sale of Auto (in both SLM and WDV methods)?

(c) If Manohar uses SLM for depreciation in the first year and wants to switch over to WDV method after the first year, what will be the impact on the profit? How will the accounting records be written for the company?